MS. PERINO: Good afternoon. I have one update on the President's schedule
this morning. He was able to connect with four members of the New York
Giants. He called co-owners John Mara and Steve Tisch; and then the Coach,
Tom Coughlin, and Quarterback Eli Manning. He called each of them
separately and he wished them his congratulations for the historic victory
last night.

I have the pleasure of turning over the podium to White House Office of
Management and Budget Director Jim Nussle. He has a short presentation for
you, to brief you about the budget. It includes graphics that will be
available on OMB's website, so you don't have to worry about not catching
all the information at first. And then he'll be able to take a good
handful of your questions, and then I'll follow up if there's anything
additional.

DIRECTOR NUSSLE: Good morning, thank you. And, Dana, thank you for
allowing me to come to the briefing room to present the President's budget.
For the first time, the President is releasing his budget in electronic
format. This is going to be an e-budget. It's already up and hot on the
website, www.budget.gov. In fact, this is the first time in history not
only that the budget has been transmitted to Congress in electronic format,
but also any kind of document has been sent to the Congress in electronic
format from the executive branch. So we're excited at OMB to lead this
effort, to utilize obvious available technology in a user-friendly format,
in a fast, transparent, public way -- and it saves a lot of paper and a lot
of trees and obviously we should be excited about that as well.

The President asked me to present a budget that addresses a number of his
top priorities. And obviously those are addressing the immediate economic
challenges that our country is facing; ensuring sustained prosperity,
keeping America safe, ensuring that we get to balance by 2012, and
addressing the long-term spending challenges that our nation is facing.

Continued economic growth is the most critical element of putting together
a budget like this or any budget. If you're going to reduce the deficit,
of getting back to balance, addressing the long-term challenges our country
faces, it's crucial to have good, strong economic growth.

Obviously, the bipartisan growth package that is pending on the Hill right
now -- which we include in this budget, at $145 billion, and we hope will
soon pass -- combined with a sluggish economy, does pose some challenges
with regard to the deficit. That bipartisan bill will raise the deficit by
$145 billion, and obviously that will have an impact, but we believe that
this up tick is temporary, and is also a manageable budget deficit if we
keep taxes low, if we can keep the economy growing, and if we can keep
spending in check.

In fact, as deficits go -- I checked back to see what it was like during
the Reagan administration and Bush and Clinton -- and under Reagan in 1983,
as an example, it was 6 percent of GDP; under President Bush 41, it was at
4.7 percent of GDP; and under Clinton, it was 2.9 percent of GDP; so this
can be temporary, and we believe this is manageable. We aren't
experiencing this deficit because Americans are under-taxed -- and this
slide shows that the tax burden, if you measure it against GDP, is 18.5
percent, which is higher than the 40-year average that America has
experienced.

Now, that's going to probably surprise some people who believe that as a
result of the 2001 and 2003 tax relief packages that obviously there must
not be enough revenue. But actually, revenue was quite strong during these
past number of years. In fact, in 2005, revenue was growing at 14 percent.
In 2006, it was growing at 11 percent. Just this last year, it grew at 6
percent. And so revenue continues to grow strong after tax relief. We
need the growth package in order to get that growth in revenues and growth
in the economy back.

But the big challenge here is spending; it's really not revenue. Spending
is the problem. We need to do more to keep spending in check in order to
balance the budget by 2012 and address the longer-term spending challenges.
The budget proposes to keep non-security discretionary spending at below 1
percent growth in 2009, and then we hold it level for the next four years.
It also terminates, as the President announced during the State of the
Union, 151 -- or it significantly reduces 151 programs, which totaled about
$18 billion worth of savings in the first year alone.

Now, these are programs that are frankly just not achieving the results
that they need to achieve. And I think good intentions are not [sic] alone
to justify a program. We need to focus on the outcomes, not just the
inputs. We also believe that earmark reforms are necessary to challenge
and change the culture in Washington that has led to wasteful, low-priority
spending, and has caused nearly 12,000 earmarks, costing about $17 billion.

In addition, we need to make sure that mandatory spending, which is
overwhelming the rest of the budget, is also held in check. Now, mandatory
spending -- for people who don't follow this on a regular basis -- is the
spending that's on autopilot. It's automatic spending that, unless
Congress or the President does something about, the spending goes on
without any kind of reduction or any kind of reform. And so we need to
make sure that we tackle that, and the President does that in this budget.

And the current trends are, frankly, not sustainable. In the next 35 years
alone, the automatic spending portion of this budget will completely
swallow all of the revenue that's available, which means there will be no
money available for some of the basic responsibilities of the federal
government, such as national defense and homeland security.

The President therefore is proposing mandatory savings package, an
automatic spending package with savings of $208 billion over the next five
years. Now, this may seem challenging. I've already had people suggest,
well, Congress won't take care of that. Well, in 1997, the last time that
Congress and the President tackled mandatory automatic spending programs,
they were able to pass a bigger package than what we're proposing here
today. And that bipartisan effort under the Balance Budget Act of 1997
helped bend the growth curve on a number of very important programs, but
ones that were growing at an unsustainable rate. So I believe it is a
realistic and reasonable proposal that Congress needs to consider.

Within that package, the President has proposed reasonable steps to get
Medicare growth under control; $178 billion of savings in the next five
years comes from this proposal in Medicare. But this means Medicare is
going to grow at 5 percent, not at the current 7.2 percent. So let me just
make sure you get that. Medicare will continue to grow at 5 percent. We
are bending the growth curve from the automatic spending rate that's
currently growing at 7.2 percent.

This proposal will also help us address nearly one-third of the long-term
spending challenge that now approaches about $34 trillion of unfunded
liability. It's simply irresponsible not to begin to make a down payment
-- and this is exactly what the President does in this proposal.

So, in conclusion, we have an opportunity here to address some immediate
economic challenges and get growth back to our economy, creating jobs. We
need to ensure the sustained long-term prosperity for our country, keep the
country safe, balance the budget by 2012, and continue to address some of
the long-term automatic spending challenges that are driving our country
into deeper and deeper challenges in years to come.

So let me take a few questions.

Q In the big picture, isn't the President leaving the next President a
budget that's in far worse shape than the one he inherited?

DIRECTOR NUSSLE: Well, if all you read was the budget that he inherited
and this budget here today, you probably missed about eight years of pretty
important stuff that was going on in the country. I mean, obviously, you
wouldn't have known about what happened with the attacks of September 11th;
the emergency spending that went into dealing with homeland security, an
entire new department that was created to protect our country and which has
protected our country since that attack; a global war on terror; two wars,
in Afghanistan and Iraq; the emergencies with Katrina and the tsunamis.

There has been a number of challenges that budgets from 2001 until today
have addressed, that have obviously met challenges that needed to be met,
dealt with economic downturn that occurred right when the President took
office, and the one now that is challenging our country that we've taken
action, and we hope the Congress will follow by taking action here shortly.
So there's no question there's a lot of story in between 2001 and 2008.

Q Well, given those ongoing challenges and particularly the economic
downturn right now, what do you say to those who say that the projection of
a balanced budget is just not credible?

DIRECTOR NUSSLE: Well, budgets are, frankly, one-year documents. We
project out five years, but they're one-year documents and they project
what we believe is the path in order to get back to balance -- a credible
path, not only to get back to balance, but also to deal with some of the
long-term challenges. It would be the same as saying, well, you're not
dealing with all of the long-term liabilities because you don't have a plan
to deal with every single dollar of that $34 trillion.

Well, we've learned from experience that in order to get to that
destination, you've got to take some bite-size chunks, and I think the
President has done that. And together with the Congress, in a bipartisan
way, yes, we've made a determination to drive up the deficit in order to
stimulate the economy and get some economic growth through a tax package
that they are now considering. But, again, it's a manageable deficit -- it
isn't the largest in history by any stretch of the imagination -- and it's
one that can be managed if we get economic growth back on track.

Q When you talk about the Balanced Budget Act of 1997, and the
bipartisan cooperation which spawned, but what in the world are you
thinking when you project that you can get a bipartisan budget agreement in
an election year, please?

DIRECTOR NUSSLE: It is challenging, there's no question about it. I've
had some good conversations with the leadership over the last weekend. And
you might be surprised. Based on the effort that we undertook here toward
the end of last year, and some of the communication that we opened up on
the budget, I think that there are many in Congress that believe rather
than waiting until the last minute in 2008, maybe we ought to have some of
those conversations a little bit earlier.

And I think also, the economic growth package has blazed a trail,
particularly with House Democrats, that I think is one that is encouraging,
one that we can build upon, because they know as well as we know that if we
can't not only deal with the growth in the economy but also control what's
happening with the budget, that this will send a bad signal to the
marketplace. That's why we held the line on spending last year, and I
think had a good outcome, and it's one that we can, I believe, move to the
forefront and get done a lot earlier this year if we're willing to work
together.

Q One of the criticisms that has come out of Capitol Hill is the lack of
full budgeting for the Iraq war. Could you address when you anticipate
that type of detail to come forward, and address the criticisms that this
is just not a credible budget, because it lacks something like that, and be
able to get to a balanced budget by 2012?

DIRECTOR NUSSLE: Well, you know, it's interesting, the President, last
year -- in fact, on this very day -- sent up to Congress a very specific
budget for the war, and in fact requested Congress to send to us and to the
Defense Department resources in order to deal with our men and women who
have been asked to do a tough job in the field. Congress, in a somewhat
unprecedented way, did not act on it until late, and in fact has not acted
on that entire package. There are still $108 billion that remains
unappropriated, that they have not yet demonstrated a desire to even
consider or to pass on either floor.

So we believe that we need to address 2008 first. We need to make sure
that the men and women who have been asked to do a tough job have the
resources they need to do that job. So Congress needs to act on the
specific budget that we asked for last year. Congress has demonstrated
that they only want to take this in piecemeal. And so rather than sending
up a detailed budget that we saw last year had to change as a result of the
Petraeus report and his testimony before Congress, Petraeus is coming back
now again in March, will report to the President on the ongoing challenges
and opportunities that are occurring in theater, and will hopefully give us
a much better road map and strategy that we can then budget from. So we
need to wait for the Petraeus report.

So we put in a $70 billion bridge in order to deal with that which we know,
as best as we can know it a year in advance, without having the opportunity
yet for the President to meet with his commanders in the field.

Q But do you expect a specific figure to come out after the Petraeus
report? And what does that do to your balanced budget forecast?

DIRECTOR NUSSLE: Yes, we do expect that as a result of the report that the
commander gives to the President in consultation with the Secretary of
Defense, that a -- and hopefully with our input as well, as we try and
craft a budget around that policy, and we will send that up to Congress
shortly after that.

The future is difficult to predict. I mean, there's obviously a lot of
fluid situation on the ground in Iraq, and to know -- and thankfully good
news, generally -- but to know exactly what that strategy will be, at this
point in time, would be unrealistic. I spoke with the Secretary just this
morning about that, and he will testify this week in front of Congress that
he doesn't know what that amount will be, but we know that $70 billion,
based on the kind of piecemeal approach that Congress is taking to funding
the war, is an appropriate amount to put into the budget at this point.

Q I was going to ask about that $70 billion figure. Can you talk in any
more specific fashion about what are you talking about in terms of how long
that might last, what specifically did you use to arrive at that $70
billion figure?

DIRECTOR NUSSLE: Well, it's an estimate, to start with, number one.
Number two, it appears to be the number that Congress is willing to
consider. In past Congresses, this is the typical bridge fund the Congress
has been willing to consider as they consider the first tranche of war
funding. The other opportunity that this does present, it presents the
President the opportunity of funding the war into next year, into 2009, but
only enough time so that the next President and Commander-in-Chief can take
possibly a fresh look at what's happening, both in terms of strategy and
tactics, as well as the amount in the budget, and that doesn't tie the
hands of any Commander-in-Chief that would come at that point in time.

So we believe this is a responsible way not only to fund the budget, but
also not to tie the hands of our next Commander-in-Chief.

Q Two questions. You mentioned 150 programs that the President wants to
either cut or substantially reduce. How many of those programs have you
proposed the same reductions in the past? And number two, on Medicare, you
had mentioned that you seem hopeful that maybe Congress might be willing to
consider some of this, but they don't seem to be at all interested, just
from what they did last year and from the initial comments. So I'm just
kind of curious what specifically gives you hope, because that's a major
part of your budget reductions.

DIRECTOR NUSSLE: I think there's a -- first of all, it's an excellent
question. I think what I've learned in watching the "fiscal wake-up tour,"
that David Walker and a number of people have been -- the message that
they've taken across the country about the fact that we need to wake up,
that we're 10 years out now from some of the challenges in Social Security,
and that this unfunded $34 trillion liability in Medicare is going to
completely consume the budget.

This "fiscal wake-up tour" I think has been one that has been waking up
members of Congress. And you see that in a bipartisan way. They may not
want to tackle it exactly the way we have laid it out in this budget. They
may not want to tackle all of the amount -- the magnitude that we've asked
to tackle in this budget. But Congress needs to know that every year they
delay, the problem gets harder; every year they delay, the amount gets
bigger; every year they delay, it becomes closer to the time when this
unfunded obligation is actually going to collapse on the country and the
fiscal budget.

As far as your first question, the 151 programs, I went back and asked for
some numbers on this. It's pretty interesting, because I wondered too; I
was like you, I thought, wow, 151 programs, is Congress really going to
look at this? In [fiscal year] 2008 we proposed 141 programs and we had 29
of them -- for reduction or elimination, 29 of them, even under a
Democratic Congress, were eliminated.

And so there is a track record here that if we send up good information and
ideas about the outcomes, whether or not a program is working well under
our program assessment rating tools that we apply to these programs, we do
get good cooperation. We had 44 eliminated in 2007; we had 89 eliminated
in 2006. And the amount of money as a result we eliminated, so the total
was 91 programs, and we saved over $10 billion in that exercise alone.

So this is not small money, and it is a worthwhile exercise. Even if
Congress disagrees on maybe all 151, I think it's an important thing we
ought to do.

Q Most of these cuts have been proposed before.

DIRECTOR NUSSLE: No, not "most." I think what we've tried to do is we've
gone across the government and said, continue this project of oversight
through all of these programs, and find out which ones are working, which
ones aren't, and when we find one that's working, we fund it. When we find
one that isn't, we make a determination whether it ought to be reduced or
eliminated. And that list continues to be updated every single year. So
some of these may be ones that have been recycled from last year, but many
of them are new ones that we continue to take a look at throughout the rest
of the year.

Q Back to defense spending, you've got $515 billion for regular defense
spending; $21 billion for Department of Energy nuclear programs; $70
billion in supplemental funding -- which nobody on Capitol Hill thinks will
be the final number; a total of $606 billion -- which, adjusted for
inflation, is more than the peak of the Korean War and the Vietnam War. Is
this -- do you have a realistic expectation of getting anything close to
this with an opposition Congress, or is this a beginning negotiating point?

DIRECTOR NUSSLE: Well, Congress needs to decide what price is worth
protecting our country. And we have made the decision that these amounts
are worth it, that certainly there are other challenges our country faces
-- you could add homeland security, certainly, to that. There's a number
of other ways that we provide the kind of security that our country needs.
Security is worth whatever it takes in order to make sure that we're
secure, because in all of this conversation we just had about -- you can
talk about anything -- education, health care, Medicare -- it means nothing
-- our economy will collapse if we are not able to protect our country and
protect our way of life. So it's worth whatever we need to spend. And
we've made, I think, a very careful determination of what that is.

So I don't believe it's just a negotiation point. I think it's what it
takes in order for us to be safe and to be the kind of superpower that can
maintain that safety.

Q Jim, why is that number going up at a time when we expect to be
drawing down troops?

DIRECTOR NUSSLE: That's a -- I'll tell you what, I had the chance to talk
to Secretary Gates about that, and we've explored that with him.
Obviously, that hasn't occurred yet, and there is, obviously, cost to a
drawdown. And sometimes those costs can be surprisingly high. But what I
would like to do is direct you to the Defense Department to get kind of the
specifics on all of that. I've had a little bit of a rundown, but if I
tried to do it here off-the-cuff, I'd probably not do a very good job.
They could probably do a much better job of explaining some of the reasons
why those costs fluctuate the way they do. But I think it's a good budget,
and it's one that Congress ought to consider.

Please.

Q In a statement, Senator Harry Reid says, "President Bush's fiscal
policies are the worst in our nation's history." One, I'm wondering your
reaction to that. And two, what does that say about the job you have this
year ahead of you?

DIRECTOR NUSSLE: Well, I would be a little concerned if I got praised from
Senator Reid on the budget. I would have to go back and maybe do some more
cutting or something in order to make sure that I wasn't in a dream-world.
(Laughter.) I'm not surprised that that's his initial reaction, but I do
think that based on the experience of this last couple of months, where we
worked with Congress to get to a final budget -- he said the same thing
last year, if I remember correctly. And we arrived at a number that was
pretty close to where the President came out, as I recall, which was not
only good news, but I think a fiscally responsible answer. And Senator
Reid was part of that discussion and negotiation, and I believe he will be
again.

I don't -- I'm not surprised at all that someone wants to score a couple of
partisan points on a day like this, but when everything is said and done,
both the appropriators, the leadership, the Congress tends to cue off of
the budget that we've presented, and I think this is a good one that's
worthy of his consideration.

Please.

Q Is there something different about the way you're presenting Homeland
Security spending this year? It seems like there's a lot more detail, and
we're just trying to make sure we're getting an apples-to-apples comparison
with last year -- seems like it's a lot more detail --

DIRECTOR NUSSLE: I would have to see a little bit about what you're
comparing, which we'd be glad to do for you. I'm not sure I can do it up
here. But if there is some confusion, we can take your specific question
and make sure we make that kind of comparison for you.

Q Jim, when you talk about bending the growth curve on Medicare, what
would that look like for patients and doctors and hospitals? How would you
get there?

DIRECTOR NUSSLE: Well, the interesting thing about it is that about 50
million seniors will actually see their Part B premiums come down under
this kind of a plan. And access, according to MedPAC, which is the
organization that analyzes many of these proposals and says whether or not
they ought to be implemented, how they ought to be implemented, when they
ought to be implemented -- they're kind of the brain trust that comes up
with a lot of the things that we've added into our budget -- they actually
believe that access will not be affected by this, and access was not
affected in 1997 when, under the Balanced Budget Act that year, we actually
drew down much further than what we're doing here under this Medicare plan.

So beneficiaries I don't think will see the differences. I think they will
see their Part B premiums come down. And according to MedPAC, access and
quality should not suffer at all. We have the best health care in the
world, and our seniors, especially, get great health care. And that will
not be affected by this small drop in percentage increases over the next
five years.

Q Well, who's going to lose money, though? Somebody has to --

DIRECTOR NUSSLE: Well, what we do is we don't have some of the
inflationary increases for providers. We hold providers to what they're
receiving today. We don't -- that's where a lot of the inflation in health
care comes from, is some of the provider costs. And so, yes, we are
holding firm on the doctor update. We're going to continue with current
law under Medicare for physicians and for hospitals. They're not going to
receive updates.

So we have, I believe, a responsible way of bending the growth curve so
that we can bring it down from 7.2 percent to a 5 percent growth. And that
5 percent growth will still provide the same kind of access and quality
that seniors have come to enjoy, as well as the rest of the general public.

Please.

Q Does the Medicare proposal include that two-year trigger as part of
it, or is that still to come later this month? How does that work?

DIRECTOR NUSSLE: Well, what you're talking about, for those who watch
this, there is a trigger that Congress put into the most recent legislation
that says if there is a -- if we show that the unfunded liability falls
below the 75-year average that it triggers an attempt on the part of the
Congress to deal with some of this, and they ask that the President send up
legislation for that.

We have sent up now, as a few of you have intimated, I think three straight
years of Medicare proposals for the Congress to consider. So a decision
has not yet been made on whether we will send up something additional to
what we're sending up today in the budget. But we believe Congress, based
on what we have sent this year and the last two years, has a number of
things that they can choose from in order to deal with that.

Q If you send up something additional, that would be, then, on top of
the $178 billion in Medicare?

DIRECTOR NUSSLE: That hasn't been determined yet. My thought is that
Congress has enough to work on now with the $178 billion that we've asked.
And, in fact, if they adopted this plan, if they adopted what we did under
this budget, it would more than satisfy the trigger that was triggered as a
result of this change.

Please.

Q You mentioned some of the challenges that the country has faced that
have helped driven up the deficit. Yet some of your most vocal critics,
actually, are conservatives on this issue. Shouldn't the President over
the years have done more to make cuts and to demand cuts from Congress in
order to help balance those spending increases that occurred?

And secondly, related to that, if you're serious about cutting spending,
why have you released a fact sheet with all these new spending proposals
here? I see $2.6 billion for Pell grants; money for a new clean energy
fund; massive spending on combating AIDS internationally. Aren't you just
really guilty of the same type of earmarking at a national level that
congressmen are at a local level?

No, I mean, let's start with what a budget is. It's a request. An earmark
is a designation. I mean, that's what an earmark is. It spends money. It
says, spend the money over here. And in fact, the earmarking that we were
most concerned about are earmarks that don't even say that sometimes. It
sometimes just gives a three-word designation in report language and then
somebody makes kind of a clandestine phone call over to an agency or
department later on and says, let me tell you what that really means.

That's not what we do here. In fact, we're very transparent about all our
proposals. They're out there for the world to see, now on the Internet
especially. These proposals are justified, with a number of detailed
evidence behind them to justify exactly why we want to spend the programs
where we want to spend them.

They're also merit-based and often competitively bid -- most often,
competitively bid. And they have the ability for Congress to pick and
choose. Unfortunately, Congress doesn't always do that with its earmarking
process. There are many that are air-dropped in into report language and
nobody sees until the last moment, that Congress hasn't even voted on or
doesn't even consider in open forum or open hearing.

So I think it's a much different situation. And we have scrubbed through
our budget for those kinds of situations and have removed them where we
thought that was the case. But we believe that the Congress needs to
change its ways on earmarking.

Q Even if they're not earmarks, why all the new spending proposals when
you're trying to --

DIRECTOR NUSSLE: Oh, yes, and we don't --

Q -- and also, historically, why has the budget not been cut more to
balance off these challenges that you mentioned?

DIRECTOR NUSSLE: Well, a budget is about choices, and choosing between
different very high-priority policies, programs. Those are things that you
have to do constantly within a budget. And so the President goes through
and he decides. For instance, in his State of the Union this year he
wanted to have a $300-million new proposal for Pell Grants for Kids. But
instead of just putting in $300 million more that came out of basically
nowhere, he said, let's go through and look at some of the items. And so
Margaret Spellings did that, looked through a lot of the programs that were
stovepipe, that were smaller grant programs that maybe weren't showing the
kinds of results we needed, and we moved some of that funding over in order
to fund that.

So it's about choices -- you balance that out, and the President has made
his priorities and his choices clear within this budget.

Yes, ma'am.

Q Could you give dollar amounts or percentages as to the cuts to states
and localities? And what kind of cushion, if there is one, is within this
fiscal plan for job cuts resulting from the --

DIRECTOR NUSSLE: I'm not sure I could do that for you off-the-cuff here.
I could probably get that for you if you want them maybe on a
state-by-state basis.

Q I'm asking overall.

DIRECTOR NUSSLE: Overall, okay. I'd still have to do that for you -- I
don't have that right in front of me. I haven't done that analysis today,
so I'm not sure I could do that for you. But why don't I make sure my
staff tries to answer that for you.

Q But when you went down and looked at, okay, let's cut such and such
for the states, I mean, did you have, like, an overall picture of how much
percentage-wise -- maybe 10 percent cuts, 20 percent cuts in funding? I
mean, what did you think of when you went down that line to cut --

DIRECTOR NUSSLE: I'm not sure if we looked at it on a percentage basis.
We looked at it more on what's working, what's doing -- what's getting the
kind of outcome that we want, as opposed to just looking at the percentage
increases. If you just look at a percentage increase and you say, well,
you've got the Congress on the one hand that wants to spend 5 percent, and
the President who wants to spend 10 percent, you may think that the
President is doing a better job because he wants to spend 10 percent.

Well, that's not necessarily the case. There are many programs where a 10
percent increase is not only not necessary, it may be going to a program
that isn't working, isn't getting the results that it needs. And it's also
trying to decide on a case-by-case basis, what is a federal responsibility
and what is a state responsibility? It could be in some of the situations
that you're looking at that these are programs that the state ought to be
taking a more leadership role in, as opposed to the federal government.

So again, I'm not sure I could do it for you, but generally speaking, those
are the kinds of things that I look at as I'm going through the budget.

Q I have a question about the deficit. You said before that it was
worth having the $145 billion stimulus package -- that was worth it to
drive up the deficit. Would the deficit then have gone down had it not
been for this package, or would it have gone up even without this package?

DIRECTOR NUSSLE: It was almost dollar-for-dollar reduction; about $145
billion. Not all of it is in 2008; it's about $125 billion in 2008 you
could take right off the top, and the rest of the $20 billion in 2009. So
it's dollar-for-dollar. And again it's because the President decided that
he wanted to take 1 percent of the economy -- that was the size of the
growth package he wanted, was 1 percent of the economy, and that's where we
arrived at that $145 billion, and the Congress agreed with that. In fact,
it appears, from what we hear, that Congress wants to add to that, driving
the deficit even higher than what we've done in a bipartisan way.

Q And then, just as a separate question, you mentioned that you had
reached agreement finally on the budget this past year and on
appropriations, but only after a lot of fighting and a lot of veto threats
and a lot of, you know, head-butting --

DIRECTOR NUSSLE: That happens sometimes in Washington, I've heard.

Q But you're speaking more optimistically now about prospects for
bipartisanship. Do you really feel that you will get to an agreement with
the Congress this year with less fighting and fewer veto threats --

DIRECTOR NUSSLE: I'm overcome by the exuberance of our most recent
experience with the growth package, evidently. Maybe I shouldn't be quite
so optimistic, but I really do feel that the Congress and the
administration has been I think working together in a very constructive way
at the leadership level, and even at the rank-and-file level. That may not
continue. But whenever you see it, let one flower bloom, let's try it some
more; let's see if we can't do that.

As I say, my conversations with the leadership over the weekend gave me
maybe some hope -- I don't want it to ever be naive or unrealistic; I've
been here long enough to not be too naive about it. But, ever hopeful,
particularly on these issues; I don't think Congress learned from the last
experience that waiting until next December, this coming December, is going
to be necessarily a good prospect for either getting more spending or
higher taxes or more of the earmarks that they want. I think the Congress
I think has learned from this last experience, and the President will be
glad to join them and work together to try and come up with a plan that
makes sense.

Please.

Q Sir, two quick questions. One, are you worried or concerned about the
deficit, as far as this budget is concerned, from China? And second,
recently, market went wild, and millions of people lost billions of
dollars, including in the U.S. and in India. You think it can happen
again, or how this affect the budget or the world economy?

DIRECTOR NUSSLE: On the second, the second part of your question, I'm not
sure I should answer that or can answer that. So let me not try and do
that and speculate.

As far as the first, certainly you're always concerned about your debt and
the deficit, and you're worried about it, I suppose. I tend to worry about
it on a daily basis. You never want to see -- I'd much rather work with a
balanced budget today. But I also would much rather make sure that our
country is protected. I'd much rather make sure that we're doing
everything to make sure our kids are getting a good education and
opportunities for jobs. I'd want to make sure that we're doing everything
we can to deal with what we're dealing with over in the Middle East. Those
are things that we need to deal with and you don't want to ever not worry
about the deficit, but there are some things that you need to worry about
more. And that's what the President has determined, and Congress has
joined him in a bipartisan way this year, particularly with regard to the
growth package.

Please.

Q On the stimulus, on the stimulus package, you've made -- the President
has made clear he would veto any bill that has a tax increase in it, but he
hasn't threatened to veto anything in terms of the size or the scope. So
even though you think a 1 percent GDP is the right size, would the
President veto anything above that?

DIRECTOR NUSSLE: I can't speak to that, but the part about the tax
increase part I didn't hear even a "but" in his statement. He said, we
will veto a tax increase. There was no "but" that came after that. I
think the fact is, is that the President believes that a $145 billion
package here is not only a reasonable package, it's the right size, it's 1
percent of GDP. I don't think we can speculate as to the outcome of the --
as to the legislative process in the Senate.

But I can tell you I'm concerned about adding spending that doesn't
necessarily have a stimulative or a growth effect on the economy. It's not
something that I would advise the President would be a good thing to be
including in the bill.

Q But the President when it comes to appropriations bills, always makes
clear that if it's above a certain limit, he would veto it, and I don't
hear that with this. I just hear that if it has a tax increase he would
veto.

DIRECTOR NUSSLE: And again, 1 percent of GDP is the general range that the
President mapped out. If he wanted to be specific on a dollar number,
maybe he would have said a specific dollar number, rather than saying 1
percent of GDP. So I can't speak to any more of it than that. I think we
have to wait and see how the process proceeds. But there is concern about
the Senate adding spending proposals to a package that thus far has been
bipartisan, has been something that could be done quickly, that would have
a good, strong stimulative effect on the economy short term, and that
shouldn't be loaded up with a lot of spending proposals at this time.

Q The up tick that you spoke about in the deficit takes it from $162
billion to $407 billion. So clearly there's something more going on there
than just a tax relief program of $145 billion. And if you start with that
premise, and then you add the $70 billion placeholder for the war, and
acknowledge that you're really going to be looking at something above and
beyond that, how are you not, in effect, really looking at essentially a
new record level in sheer dollar terms for the (inaudible)?

DIRECTOR NUSSLE: Well, the up tick in the deficit -- again, $162 billion,
there have been some updates since then, and CBO has also testified, and we
agree with them that because of the downturn in the economy and the fact
that revenues, as I reported also, have not been coming in -- corporate
receipts in particular -- that we haven't been able to experience the same
kind of growth that we did in the last three years. And that has
definitely had an impact. So it's not all of the growth package, but
that's the most significant part of it, is the growth package. Some of it
is from the excess spending that was done over and above the President's
budget this last year on the part of Congress, but most of it is this
bipartisan growth package.

Q Well, then how does the realistic ultimate war figure not take the
deficit to record levels in sheer dollar terms?

DIRECTOR NUSSLE: Well, the matter of record levels, again we're going to
be -- in sheer dollar terms doesn't mean anything if you don't compare it
to something. You can only compare something in relationship to something
else. And comparing it on a nominal dollar figure amount really doesn't
tell you much. It's only when you compare it to the size of the economy it
tells you whether or not you're able to manage that debt or that deficit.
And as I reported, I think both in terms of the '80s and '90s, we had
deficits that were far greater, and at times when we weren't necessarily at
war or not having some of the economic challenges that we have now.

So I believe that the right comparison is to compare it against the
economy. There's no question when you add in the final amount it will
change, and it may grow higher, but we don't know what that is because
Congress has not even yet completed its job of working on the 2008 war
package.

Last one. Yes, ma'am.

Q Estimating the cost of the war in the out years can be difficult
because of changing conditions on the ground, but that's not really the
case with the AMT patch, and why don't you approve a patch after the 2008
taxpayer year?

DIRECTOR NUSSLE: I think the issue here is that the President doesn't want
to just patch it. He believes it should be fixed, and should be fixed
permanently, and should be part of a comprehensive tax reform. It's the
reason why he promoted that within his tax reform commission. He is ready
to work with Congress in order to reform taxes; has been since he came to
office. It's the Congress that seems to only want to deal with this in a
piecemeal sort of -- every year sort of way. We believe that this should
be done as a comprehensive matter and not done in a piecemeal way. So
that's the reason why we don't patch it: We believe it ought to be fixed
as part of comprehensive tax reform.

Thank you very much.

MS. PERINO: Great. If you have more questions on the budget, then our
man, Sean Kevelighan, who -- this is his last budget with us; he's actually
moving on after next week, so we'll miss him very much.

Q How does the President feel about leaving office with a $9 trillion
national debt and a record deficit?

MS. PERINO: Well, I think Director Nussle just answered a lot of those
questions.

Q Is he going to justify it by war alone?

MS. PERINO: You heard that the President just announced a budget that
Director Nussle just explained, and one of the things that we have decided
to do, along with the Democrats on Capitol Hill, is to work together on an
economic stimulus package that will temporarily increase the deficit. And
that's a decision that we've made in the interest of the country.

Go ahead in the back.

Q Yes, on the 150-odd programs that are cut, surely there are others
across government that scored just as poorly or performed just as badly.
What is it about those 150 that put them on the --

MS. PERINO: I don't know how they were chosen. I'll ask OMB to get back
in touch with you.

Yes, sir.

Q In real dollars I think this may be the lowest funding request for EPA
since 1997. Can you address some of the criticisms from state
environmental regulators who are already saying it's just simply not enough
money for clean water infrastructure, SuperFund clean ups, air monitoring
and everything they have to do?

MS. PERINO: Again, same answer. I'm going to have to have OMB get back to
you. I think that they'll have all of those details for you. And
obviously one of the things that we're doing environmentally is something
brought up earlier by Keith, which is that we have a new clean technology
-- international clean technology fund. So there's lots of different
priorities, but I think that all the agencies have been given what they
need, based on their conversations with OMB. They had a lot of
back-and-forth over the past year.

All right, Les.

Q Is it possible to go to another subject?

MS. PERINO: Please.

Q Thank you. Thank you, Dana, two questions. Virginia's Congressman
Virgil Goode has written the President asking him to order the Justice
Department to submit a brief in the Supreme Court case that would support
the rights of U.S. citizens under the Second Amendment. My question:
Since this Republican Congressman wrote if the Supreme Court were to accept
the Solicitor General's line of argument, he sees a categorical gun ban of
virtually all self-defense firearms could well be found to be
constitutional -- does the President agree or disagree?

MS. PERINO: I'm just going to -- since that is a matter of litigation on
which the Justice Department has filed a brief, I'll refer you over to
them.

Q Okay. Since the Supreme Court's willingness to hear the case of Baze
versus Rees it appears to have effected a temporary moratorium on death
sentences by injection. My question: Does the President believe that the
36 states that have not abolished capital punishment should use gas,
gallows, electricity or bullets as an alternative? (Laughter.)